L&T Finance Holdings Ltd. (LTFH) the equity listed holding company, announced the successful completion of the merger of its subsidiaries, L&T Finance Ltd. (LTF), L&T Infra Credit Ltd. (LTICL) and L&T Mutual Fund Trustee Ltd. LTFH is a leading NBFC and offers a range of financial products and services under the L&T Finance brand. LTFH served as the holding company, while LTF and LTICL served as high-value debt-listed businesses and operating entities, respectively. With this merger, all lending operations will be consolidated into a single organisation, LTFH, which will become the equity-listed operating lending entity.
The proposed merger was approved by the respective boards of the said companies in January 2023, and the process was completed following approvals from shareholders, creditors, and regulatory/statutory authorities – Reserve Bank of India (RBI), National Company Law Tribunal (NCLT), Securities and Exchange Board of India (SEBI), and Stock Exchanges.
Advantages of the merger:
- Enhanced governance and controls – Due to simplification of corporate structure and removal of duplication of various activities at multiple subsidiaries, a single entity structure will help to improve governance and controls.
- Smart Liability management – Liquidity management for a single entity would bring treasury and operational efficiency in terms of cost incurred for managing liquidity at several entities (subsidiaries) vs that of a single entity; consequently, shrewd liability management would be aided.
- Potential to deliver enhanced return to shareholders – LTFH will transition from a holding company (Core Investment Company) to an active lending organisation, earning direct profits from the lending businesses and increasing its potential to provide enhanced returns to its shareholders.
- Seamless compliance and adherence to RBI Scale Based Regulations – Under current RBI regulations, LTF was classified as an NBFC – Upper Layer, which requires it to be listed on stock exchanges within three years of being classified. This would have resulted in two firms being classified as stock within L&T Finance. The merger avoids the formation of two equity-listed businesses while guaranteeing continuous compliance with the RBI Scale Based Regulations for listing.
- Operational efficiency: A single entity structure will improve operational efficiencies by better utilising managerial bandwidth, consolidating systems and controls, and lowering administrative costs / expenses.
Commenting on the merger, Dinanath Dubhashi, Managing Director & CEO, LTFH said “It gives me immense pleasure to announce that the merger has been completed before the envisaged time with all the necessary approvals in place. This merger is amongst the key strategic initiatives undertaken by us in line with the ‘Right Structure’ strategy that our Company has been implementing over the last seven years; with the number of NBFCs reducing from 8 to 1. The decision to merge two lending entities with the same NBFC – Investment & Credit Company registrations and one non-operating entity with LTFH was taken after carefully considering market dynamics, internal synergies, and a vision for sustained growth. With the merger, we believe we will be able to unlock newer avenues for growth, innovation, and long-term success. All these benefits would lead to superior governance that would create sustainable value for all stakeholders.”